Ultimate Guide to Understanding if Amazon FBA is for you. A Real Eye Opener

Is Amazon FBA fulfillment for you

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The physical goods selling business is entirely different than participating in a digital goods selling business.

The latter is a virtual business with no stock, little or no initial capital outlay, and with fewer risks other than time and opportunity cost.

With the former, while not being an actual manufacturing company with factories, machining equipment and a slew of employees, the reality is that there are far more moving parts or initial and ongoing costs involved with a physical goods business.

Virtual Goods Business

Internet marketers and online entrepreneurs can be focused on making income online via paid advertising, affiliate marketing and own products. More recently the Amazon Kindle Direct Publishing (Amazon KDP) has also been getting a strong push.

To take Kindle Publishing as a recent example that is also focused around the online retailer, Amazon, digital publishers will usually outsource the writing of short 30-35 page Kindle eBook (6,000-8000 words only) paying minimal prices to writers due to the truncated length. After paying for an eBook cover on Fiverr.com and a bit of quick editing, the book is uploaded to the Amazon KDP account and is available for download shortly after that.

This is a “no fuss, no muss” type of business where the entrepreneur doesn’t get their hands dirty. The typical outlay for each product is under ‎£300. This can seem a large amount for people who object to investing money in the thousands of pounds for new product development. Business owners from the offline world will quickly advise that this cost for product development is cheap at one tenth of the price.

Related: Learn more about selling on Amazon.

Many of the Kindle Publishers later move on to promoting and working with the Amazon FBA business opportunity taking their profits from Kindle (and other online activities) and using them as seed capital for this new business line.

Kindle adoption rate

Amazon FBA Has Two Faces

Amazon FBA (or Amazon Fulfillment by Amazon) has two guises. This ultimate guide delves into the nitty gritty of the latter version, but for clarity we also explain the first type of Amazon FBA to avoid any confusion.

Resellers Using Amazon FBA

raikin profits

There is an active community of resellers who look to purchase goods at a discount for resale online.

Goods can be found through thrift stores, pawn shop and retail arbitrage.

Retail arbitrage is where resellers make purchases from Target, WalMart and other big box stores looking for steeply discounted products to purchase in bulk for resale online.

Resellers like YouTubers’ Resale Rabbit and Raiken Profit will then resell their goods by packaging them up and shipping them off via UPS to an Amazon.com warehouse.

Amazon holds the stock in its inventory, adds the item to the seller’s account and ships it out to the buyer when it is sold.

The nature of this type of business, which is also called Amazon FBA by many people, is that it is a physical goods business that benefits from stock being held for limited periods of time (a day or less) before it is shipped off to Amazon.

Working capital is used to purchase the items, but this is recouped within 1-2 months in most cases when the item sells, and Amazon pays the FBA merchant for the sale value, minus the Amazon FBA fees.

The downside for this type of Amazon FBA business is that it is location dependent, requires the business owner to hustle constantly to find cheap items suitable for resale, and it doesn’t scale well at all.

Amazon FBA: Version Two

Amazon FBA

The larger, more scalable version of Amazon FBA is one where newly manufactured goods are sourced either from local manufacturers at preferential prices or more typically from a Chinese manufacturer, packed, shipped on container boats (or more expensively by cargo plane) from the Chinese mainland to one of the shipping ports or major airports in the United States.

Goods can also be shipping to the UK and other locations where Amazon operates their Fulfilment by Amazon programme.

For future reference, when we refer to Amazon FBA, we will be talking about the second version usually involving foreign manufacture of goods for sale on Amazon.

How Do You Start With Amazon FBA?

Unlike beginning a Kindle Publishing business, getting started with Amazon FBA is no easy undertaking.

White labelling a product that involves ordering a product that is already being produced by a (Chinese) factory involves considerable risk and costs.

The typical place where people new to Amazon FBA start is Alibaba. This website will show what Chinese manufacturers can produce for you.

Whether an iPad leather case, a Vitamin supplement, or some other type of product, there is usually a manufacturer somewhere in China that will be happy to take your order.

Negotiating with the Chinese manufacturer comes next. Moving through the unfamiliar technical terms, manufacturing lingo, their requirements, and what can be produced is a bit of a minefield for the uninitiated.

There is also a risk that any payment will go missing and that the manufacturer is not real. New entrants into Amazon FBA need to be both aware of these risks and learn ways to either avoid or mitigate them.

Quality Control Concerns with Manufacturing

The unwritten rule with Chinese manufacture is that one has made a special point of mentioning the need for a high-quality product.

While the price per unit for a manufactured item may seem low, this ignores all the additional costs added on until the product is ready for the retail market.

A five-pound product manufacturing cost in China could retail in the Western world for 30-40 pounds. Yes, really!

There often is not a great deal of difference in the price difference between an item that costs £4 per unit to make and one that costs £6.30 to make.

However, the difference in the quality of the materials used during manufacturer, the durability of the item, and other details matter when it comes to Amazon Customer reviews later.

White Labelling Physical Goods & The Growing Risks

One of the unwelcome phenomena with Kindle Publishing given its low barrier to entry for start-up costs has been the mass production of low-quality eBooks into the Kindle book market.

With the first ten books on the myriad of health benefits of using coconut oil, came another 20 eBooks piling on top of those.

They all have slightly different eBook covers, and the written contents are also not the same, but for $2.99 eBook readers are largely seeing duplication rather than original thought.

This is leading to negative reviews with a number of people complaining about the “same same” nature of all these products.

We bring this up here because a similar thing is happening with Amazon FBA space at the present time as more people try to take advantage of the physical goods opportunity.

When using Alibaba, you are usually looking to find a manufacturer for a product idea that you’ve seen, heard of, or would like to have produced.

When finding the manufacture in the Far East for that product, you’ll usually discover that they make the product already.

This is beneficial because they should be already successful in the manufacturing process by now, but it also has downsides too.

When you order that innovative iPad cover that swivels on a 360-degree hinge, you may discover later that you are number 30 on the sellers list.

There are 29 other Amazon FBA sellers who are actively selling the same product on Amazon. We are not talking a similar product here either.

No, no. We’re talking about the exact same product.

They are already selling what you are planning to have made, packed, shipped, transported, unpacked and later sold on the Amazon site.

Often they bought their supply from the same factory; they just got there before you did.
While there can be safety in numbers, the more people who go into the Amazon FBA programme and choose the best-selling products, the more the competition will be barking at your heels like an over-eager dog looking for his next meal.

Other sellers with a low Amazon Sales Rank mean the product is selling well (a good sign), however too many sellers can often mean a race to the bottom with pricing trying to beat out their other 29 competitors selling the same product (a very bad sign).

Marketers are talking about the need for a USP.

This means a unique selling point. Something to differentiate your product from a competitor’s product. In the case of white labelling the same product as everyone else in that market segment, the only real way to differentiate is with better product photography, a more convincing product description, and keeping the product in stock at all times.

There is not much leverage there.

Making Changes To The Product Before Manufacture

The more astute physical goods marketers will grasp the problem. They will talk with the Chinese manufacturer to see how they can help make changes to their existing product to make it different from the competition.

Have a few ideas that will improve on what they already make? This is where a real difference can be made.

Such changes can be mentioned in the product description and highlighted in product photos so that Amazon visitors can see the unique selling point clearly.

Ideas for what to change can be cleaned from the Amazon customer reviews from competitors’ product who already sell the chosen product.

If the plastic used or the thickness of the iPad stand is in question, the reviews will talk about that. If the stand hinge makes it difficult to open out the stand to different angles for easy tablet use, then you can be sure someone will complain about that too.

These types of customer reviews can be a goldmine to learn how existing products can be improved upon.

Do bear in mind that making such changes is often more expensive.

The manufacturer may need to purchase new equipment, retool their existing equipment or change their manufacturing processes to accommodate your order. These kind of modifications will come at an additional price.

Amazon FBA Training Courses Are Flourishing

With the expanding opportunity for many people looking to get started with Amazon FBA, savvy marketers saw an opportunity to turn a profit.

Why mine for gold when you can just sell them shovels, buckets, and beer at the local tavern? In several cases, the people marketing Amazon FBA courses are involved at both ends; as a practising Amazon FBA business owner and also as a seller of online courses. This, at least, is a good sign.

Amazing Selling Machine

amazing-selling-machine

The most successful (and most expensive) of these courses is The Amazing Selling Machine. It has now gone through several annual versions of the course and participants in typical in-with-the-crowd thinking refer to themselves as “ASM1”, “ASM3” or “ASM4” to distinguish how long ago they signed up.

The business now operates out of Amazing.com, a domain that was purchased late in 2014 for a rumoured low six-figure sum. Previously, the company used both AmazingSellingMachine.com and AmazingAcademy.com as locations to promote and teach their video courses.

The course has risen in price over the years. More recently it was priced at $3,500 which could be broken down into 4 monthly payments of $997. In the last round, the price has risen to a cool $5,000 per member. Whew!

The creators of The Amazing Selling Machine, Matt Clark and Jason Katzenback, now offer scores of online courses. Off the back of the profits from the Amazing Selling Machine, their staff has swelled too.

What is covered with the video course is fairly extensive. The course teaches:

  1. How to open an Amazon FBA account
  2. The basics of the FBA business model
  3. How to deal with foreign suppliers
  4. Differentiating your product from others
  5. Placing orders
  6. Managing inventory
  7. Improving Amazon product pages to increase sales
  8. Driving traffic
  9. A few other extras

The course also holds irregular get-togethers where fellow ASM participants come together to share experiences, listen to the speakers up on stage, and feel part of something… expensive.

Proven Amazon Course

Proven Amazon Course

The Proven Amazon Course is a second course that focuses on Amazon FBA. It is run by Jim Cockrum who is well respected on the Warrior Forum (he has even posted his personal email for people have problems signing up for courses via AOL and Hotmail).

The course provides video tutorials, PDFs, past online webinar recordings and other resources all aimed at getting members on Amazon FBA quickly.

Upon signing up, the service directs the member to their private Facebook group with approval that is quickly given.

Membership is also added to their My Silent Team site that includes discussions about all programmes under the Jim Cockrum banner.

The course is a fully rounded one. It covers both forms of Amazon FBA discussed earlier. Therefore, the course covers:

  1. Retail arbitrage
  2. Online arbitrage
  3. Buying second-hand for resale on Amazon
  4. Buying wholesale for resale
  5. Private labelling by buying established products from product manufacturers
  6. Sources for product acquisition
  7. How to manage the Amazon system are also covered

There are 14+ videos, several of which run for one or several hours.

The course is presently sold for either $299 one-time payment or three separate monthly payments of $109 (which comes out at $327 total cost).

FBA Headstart

FBA-HeadStart-Amazon-Training

FBA Headstart is the brainchild of Mark Scott Adams. He has a popular YouTube channel with good tricks and tips to be aware of when selling via Amazon FBA.

His courses include instruction videos about getting started with Amazon FBA, a list of his resources, access to discounts for product photography and packing of products, two live group coaching calls, and a 30-minute one-on-one review with Mark Scott Adams himself.

The basic breakdown of the course is:

  1. Finding the Right Product to offer for sale
  2. Setting up your product correctly in the Amazon marketplace
  3. Head-start marketing system to increase sales for ongoing passive income
  4. Advanced strategies for Amazon FBA optimisation

The course is presently sold for either $299 one-time payment for the VIP Member product or $399 one-time payment for the VIP Plus Member.

The main difference between the two packages is a 30 minute Skype call with Mr Adams. He is charging his time out at just under $200 per hour. Nice work if you can get it!

Other courses

There are many other courses available. They seem to be popping up weekly as internet marketers wish to take advantage of the gold rush into Amazon FBA. Courses like, and these, and these on Udemy are typical.

Difficulty with Proper Ratings for Online FBA Courses

One of the difficulties when assessing a good Amazon FBA course is the raving reviews that can often be found on forums like the Warrior Forum and other internet marketing forums.

It is fair to say that those taking up various courses – assuming they are not directly affiliated with the product – are newbies to Amazon FBA and quite often newbies to internet marketing in general.

This makes them prone to hyperbole. They’re also not likely to return later to explain how they just lost thousands of pounds on the course costs and their first two screwed up goods orders either.

Promoters of Amazing Selling Machine and Other Products

There are numerous promoters of the Amazing Selling Machine product when it is offered for sale each year.

Typically they will bundle various offers usually including some of their previous products, to entice the site visitors to purchase ASM.

From a strictly financial standpoint, the reason is simple. The affiliate commission on a $5,000 product is pretty juicy and involves no financial risk or capital investment, unlike the Amazing Selling Machine product or doing Amazon FBA itself.

Useful Resources

Scott Voelker from The Amazing Seller has a long-running podcast series that explains Amazon FBA problems, issues and makes suggestions via YouTube videos, live streaming Pericopes, and auto podcasts.

While the information is often excellent, what comes across clearly is the sheer volume of knowledge that needs to be acquired by new people entering into Amazon FBA.

Not knowing certain points before going ahead with the first order or product selection can be deadly for a successful return on investment, let alone turning a profit.

If anything, this should be seen as more of a warning sign rather than a positive in the sense that one needs to study the pitfalls (not just the potential for profit) for several months to protect oneself from the downside risk.

Serious Survivorship Bias Problems

The major difficulty with most of these products is not just the cost of them, but that they can mislead buyers into believing that Amazon FBA is easy. It isn’t.

New entrants need to understand how to be strategic about product creation, product sourcing, creating original products (not copies of other products already flooding the market), cash-flow concerns, inventory management, dealing with foreign manufacturers in a different culture across another continent and time-zone, and so much more.

The interviews often uploaded to YouTube, by people usually selling The Amazing Selling Machine course as an affiliate, highlight the tens of thousands of revenue that can be made.

Unlike with the mainstream news, it is only good news and positive sales reports that get highlighted in this community. There is considerable survivorship bias here where possible participants are not advised about the percentage of people who lose their initial investment plus the cost of the course.

Bold claims can be made, but there is also no back-check to verify the information or provide a balanced viewpoint of how things can also go badly wrong.

This little details almost never mentioned and if it is, it is only mentioned in passing.

Only participants on Reddit seem to allude occasionally to problems being successful.

They clearly are experiencing Amazon FBA issues like Chinese manufacturers ripping them off when not using an escrow payments service, poor manufacturing quality making the entire order a bust, items arriving broken, and numerous other issues.

Start Up Capital Far Higher Than Suggested

While the Q&A responses on the home page of the FBA Headstart landing page suggest that “It is very realistic to only have to invest $200-400 on your initial inventory. I invested $400 on my first product and paid it off in less than a month.” this only half the story.

The problem here is that only the initial order from a warehouse can be a small one. After that, the orders need to be a regular size that are several times larger.

For products that sell out quickly and with a lead time of up to two months from Chinese order to Amazon replenished stock levels, new participants in Amazon FBA need to be prepared to pay for at least two orders (possibly three) before seeing any return on investment from Amazon themselves.

Products with a manufacturing cost of a few pounds per unit are not the most profitable items on Amazon FBA either.

Items that cost above twenty pounds each tend to sell better because there can be more that goes into each product. More features to promote, more thought, higher quality, etc.

Going up to a higher manufacturing cost is impossible when only looking to pay a few hundred dollars for an initial order and a couple of thousand for the second, larger order.

Given that this kind of money cannot be saved in two short months in most cases, then to suggest one can get started with only a couple of hundred dollars is somewhat misleading.

Advice For People Considering Amazon FBA

For anyone who is completely new to Amazon FBA, a course that is priced at $200-300 like the Proven Amazon Course or FBA Headstart may well offer a short-cut to learning what is involved.

It is difficult to justify spending $5,000 for a course that has steadily risen in price from $3,500 a short time ago that is largely imparting the same information.

There are no special tricks with FBA; it is just a business that has to be learned step-by-step.

Realistically, to be able to commit to Amazon FBA, you need to have £6,000-18,000 to cover the initial first 2-3 orders.

While the initial order can indeed be kept small to reduce risk, after about two months when it is finally in stock with Amazon, initial sales will likely wipe out inventory in days or a couple of weeks.

Given that the lead time on restocking is 6-8 weeks at a minimum, a larger initial order (carrying greater financial risk) is necessary to avoid being out-of-stock almost immediately which can cause the product listing to disappear from Amazon (sometimes including any hard-earned product reviews).

A follow-up order mere days after Amazon began selling the first product requires much deeper pockets where the Amazon FBA seller isn’t so much doubling-down, but increasing their risk 5-10 fold before a pattern of sales has been properly established. This is done to avoid being out of stock for 3 months.

Furthermore, starting with Amazon FBA not only front-loads the capital investment but it does so without usually being able to diversify into more than one product or type of product.

This carries considerable risk of choosing a dud product when first starting out. If the first product doesn’t sell well, then the newbie may have a stiff choice whether to “invest” even more into a second product and try again or to give up at that point.

Unless the FBA participant has pretty deep pockets, a couple of missteps with product selection could sink them and leave them seriously out of pocket.

Which Course Is Right For You?

Of the three courses, the Proven Amazon Course offers a broader range of lessons that covers information for retail arbitrage and online arbitrage that can be done locally rather than only with foreign-sourced goods.

However, when looking for a Chinese-goods oriented training system for Amazon FBA, the FBA Headstart looks like the better choice.

It is difficult to justify the “fanboy” excess of the pricing for The Amazing Selling Machine.

All courses cover the basics and some intermediate-level training with Amazon FBA.

The Amazing Selling Machine is not worth 10X or more than the other two courses mentioned.

You've got into a course? Try this tool to achieve greater success

If you’re thinking of going ahead with Amazon FBA then consider this tool I recently found called “Profit Phoenix”.

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They’re constantly adding new features and have additional features that no other software has, like Instant Market Analysis, so I suggest you explore this software suite in assisting the growth of your business.

Using advanced software can make growing your Amazon business a lot faster and easier.

You can learn more about profit phoenix here.

About the Author Azzam

As a Digital Marketeer and Entrepreneur, I have been fortunate to have learnt from some of the best of the best. That is what I believe is critical to ensuring anyone’s success. Take what has worked for successful people and make owning it, knowledge first and then applying what you learn by taking action. Persevering on that path will bring about sure success, simple but effective formula.